August 11, 2017

It’s Friday desk clearing time for this blogger. “Changes in the mortgage industry are afoot, with the goal of loosening some of the strict standards established after the subprime crisis — rules some blame for impeding sales. Government-controlled mortgage giants Fannie Mae and Freddie Mac are paving the way by rolling out new programs to encourage home ownership. Also, lenders are moving to relax some standards partly because they fear losing business as home prices and mortgage rates rise, said Guy Cecala, publisher of Inside Mortgage Finance. ‘If your business is going to drop 20 percent,’ he said, ‘you need to come up with ways to offset that.’”

“The trend started in late 2014 when Fannie Mae and Freddie Mac announced new programs that allowed loans with as little as 3 percent down. But many large banks still reeling from the housing bust that cost them billions were skeptical. Bank of America Chief Executive Brian Moynihan said his company was unlikely to participate. But less than two years later, the bank started offering 3 percent down loans through a partnership with Freddie Mac. Wells Fargo, the nation’s largest mortgage lender, also jumped in last year, partnering with Fannie Mae. JPMorgan Chase now offers 3 percent down loans as well.”

“The 3 percent down loans through Fannie or Freddie are capped at $424,100 in most of the country. ‘We are seeing more and more lenders adopting it every day,’ said Danny Gardner, Freddie Mac’s vice president of affordable lending and access to credit.”

“Pilot programs with Guild Mortgage of San Diego and United Wholesale Mortgage of Michigan require the borrower to put down 1 percent of their own money. A pilot through Movement Mortgage allows a borrower to put down nothing. David Battany, Guild’s executive vice president of capital markets, said it launched its 1 percent down program to ‘address the down payment challenge, especially in California,’ where real estate prices are particularly high. It was also struggling to compete with lenders that had previously launched very low down payment options. ‘We were losing business,’ Battany said.”

“If there’s one word that comes up more than any other in the Seattle-area housing market, it’s probably ‘bubble.’ A new survey found 71 percent of Washington adults think a housing bubble is coming. New York, Florida and California residents were the next most likely to fear a housing bubble. George Moorhead, owner of Bentley Properties in Bothell, said the b-word comes up with just about every buyer he represents. ‘They’re getting very wary about a bubble,’ Moorhead said. ‘It is very much a huge concern. The perception is: how long can this go?’”

“It may not be good for his business, but Joshua Hunt, the CEO of local real estate brokerage Trelora, says that for a significant number of people in Denver, including many of those who’ve just moved to the Mile High City, renting makes more sense than buying. ‘We’re already seeing rents drop at higher-end apartments because of the massive increase of available units that have hit the market in the last ninety days or so — and that will continue over the next sixty to ninety days,’ he maintains. Waiting to purchase could be particularly key now, given the boom-and-bust history of Denver’s housing market. ‘Over the past 21 years, I’ve seen it happen twice, and a third time is coming,’ Hunt says.”

“Those woried about chronically stalled luxury property sales at the high end of the Westchester residential market finally have a reason to exhale, thanks to Douglas Elliman’s second-quarter report. Of course, all this movement does come at a price. TRD’s ranking of active listings with the biggest price cuts indicates that brokers are slashing asking amounts by as much as nearly 80 percent in the hopes of luring luxury buyers. ‘Buyers are looking for good value, particularly at the upper end of the luxury market, where we have a larger proportion of inventory,’ said Jim Gricar, general sales manager for Houlihan Lawrence, headquartered in Rye Brook. ‘That proportion of inventory has increased relatively dramatically in the last couple of years.’”

“Toronto in mid-August feels like a city waiting with bated breath. Sales of existing houses in the Greater Toronto Area plunged 40 per cent in July compared with the same month last year, with detached houses leading the decline. ‘Sensing a top, sellers have flooded the previously parched landscape with listings, shifting the market balance toward buyers,’ says Sal Guatieri, senior economist with Bank of Montreal.”

“After months of decline in the London housing market, largely due to prime properties in the center of the city, prices in England’s southeast had their worst performance since 2011, the Royal Institution of Chartered Surveyors said in a survey. ‘Sales activity in the housing market has been slipping in the recent months and the most worrying aspect of the latest survey is the suggestion that this could continue for some time to come,’ said Simon Rubinsohn, RICS chief economist.”

“It was only four years ago that Africa’s richest square mile became the destination of choice for SA’s major financial firms, sparking the largest commercial property development boom of the decade. However, the story is different today. High-end developers are not reaping rewards, as sales of apartments in Sandton have slowed amid falling demand from prospective buyers and investors. ‘Things have changed dramatically. Savvy investors are sitting on their hands at the moment,’ said Kent Gush, MD of Kent Gush Properties.”

“Another problem for high-end developers is faltering off-plan apartment sales. Marc Wachsberger, ‎MD at The Capital Hotel Group, which manages hotel and luxury apartment buildings The Capital 20 West and Empire in Sandton, said off-plan apartment sales have ‘ground to a halt.’”

“The cost of buying property in Sydney has never been higher, but for foreign buyers the sums involved are even more exorbitant with a recently introduced extra 4 per cent stamp duty surcharge and additional land tax. Adding insult to the mounting costs is the the 1 per cent Foreign Investment Review Board application fee introduced in July 2016 that has hit the rarefied trophy market of the eastern suburbs, according to Bill Malouf, of LJ Hooker Double Bay.”

“McGrath’s Michael Coombs said while foreign buyer demand remains strong, he had two deals in the $10 million to $20 million range fall over in recent weeks after the buyers calculated the extra costs of buying in Australia. ‘In both cases they’re reassessing if they want to buy in Australia or take their money elsewhere,’ he said.”

“Has the crash finally started? Barfoot and Thompson’s July sales report showed the average sale price for an Auckland Eastern suburbs home was $1.117 million in July, compared to $1.193m in July last year. In the North Shore the average price was down from $1.3m to $1.06m. In South Auckland, it was down from $824,069 to $708,069. Is China’s crackdown on money leaving the People’s Republic causing the crunch? Are anti-money laundering laws finally working? Have the Reserve Bank’s high deposit-for-investor rules knocked them out of the game?”

“Whatever the reasons, some people who bought recently now own homes worth less than they paid for them. A tragic few may even be in negative equity, when the value of their home minus the cost of selling it (real estate fees, advertising, lawyers, etc) is less than is needed to repay the mortgage. Large numbers of Britons have had to learn to live with negative equity after a boom was followed by a lasting bust. If prices keep falling some Aucklanders may find themselves in a similar boat.”

“Negative equity is depressing for a homeowner. It means they have gone backwards. In the short term, negative equity only really becomes a problem for a homeowner if they have to sell, remortgage, or want to borrow more. Banks don’t want new borrowers with negative equity. Even people with less than 20 per cent equity aren’t prime borrower to a bank. And (economists shudder) small business loans are secured against home equity.”

“Long-term negative equity is a personal nightmare for homeowners. It traps them, and is a rankling symbol of how they are a victim of failed markets, failed government policies, and other people’s profiteering. Ironically, that’s exactly how many renters feel.”

Here is an older article…not sure if the one you posted has to do with “pre-construction” condos (which effectively help finance the construction of new supply), or people buying existing, slapping down some new carpet and jacking up the prices by 25%.

I suspect it’s pre-construction flipping.

The good news about all this:

1. It will lead to fewer “pre-construction” buyers that are speculators, meaning future supply that is driven by “pre-orders” will better match demand from people who actually want to live in the units; and

2. I don’t think you can get a loan for a “pre-construction” condo…unless you are securing it with another asset…these losses are primarily from the speculators’ pockets.

That’s because you don’t pay attention. Supposedly in Miami they put 30% down. Then it went to 25%, then 10%. And in early 2016 IIRC, I found a Miami article with a broker saying all of the buyers he knew had refinanced (prior to finished construction) and bought more. You do know they have stalled towers down there 13 floors high?

I found a Miami article with a broker saying all of the buyers he knew had refinanced (prior to finished construction) ??

Not sure about Florida real estate laws but in California I don’t believe this is possible at least with institutional financing…I can’t even imagine private money doing it…You can’t deliver “clear/clean title to the property until the construction is Finaled by the city and it is released for occupancy…The California Department of Real Estate also has much say on when clear title can be delivered in any subdivision…Large deposits I can understand but long term financing I don’t think so…Not in Ca.

They do things a little differently in Miami. New York City too, I’ve read.

Comment by Rental Watch

2017-08-11 10:20:28

“pre-construction” means that it isn’t built. There is no real property to secure a loan for the CONSUMER of the condo. I’ve never heard of a lender that would take the purchase contract on a to-be-built property as collateral.

The 30%, 25%, 10% refers to the amount of the total condo price required to be paid from the speculator. That 10% is coming from that speculator’s bank account, not an institutional lender. Often times, that 10% increases with construction progress.

There may be exceptions…as I noted, perhaps they drew on a margin line to get the money, borrowed from their cousin “Fat Tony”, or took out a second on another piece of property, but they didn’t secure it on the to-be-built condo.

And scdave, I think you are right, in CA, “pre-construction” sales are not allowed…you can’t take non-refundable deposits on condos that haven’t been built…accordingly, when a new condo project is built, all the capital needs to come from a construction lender and equity investors, none from the ultimate consumers.

In other states, actual construction funding can come from non-refundable deposits from the actual consumers–like FL, and I believe also Nevada.

Comment by scdave

2017-08-11 12:23:38

you can’t take non-refundable deposits on condos that haven’t been built ??

That is correct in Ca…The title company’s are also very sensitive about insuring title on new construction because of the mechanic’s lien laws in California…They are very tough…

Comment by Rental Watch

2017-08-11 16:32:20

That’s the tough part about condo financing in CA. If you are building a tower of 200 units, vs. a 200 unit single-family subdivision, you need to build all 200 units before you can sell one.

With the subdivision, you typically phase it (building 10-15 at a time).

The difference is that if the market crashes mid-construction of a condo building, you are totally screwed.

For the subdivision, you can stop building, adjust your plans, wait it out, etc., and you are only royally screwed if you overpaid for the land.

And that’s why condo developments usually require much more equity than traditional single family developments (on a percentage of cost basis), and are typically developed to higher gross profit margins.

‘Hot demand for new luxury condominium units is reshaping San Francisco’
By Linda Van Drent

Published: Dec 16, 2015

‘One of the largest luxury condo developments is the 42-story, 656-unit Lumina project by Tishman Speyer Properties to be completed next year. The September 2015 Mark Co. report indicates more than 50% of its units are already sold.’

Since you say you are cashing out now you played the sucker’s rally well, leveraged to boot. Problem will be that you are a euphoric gambler and will most likely put the money back on the table until you’re busted.

I bet he won’t. For heaven’s sake, this is HBB, not the general population. Yes it’s possible to get in and get out without repercussions, if you’re smart as Jingle Male was. You’ll have to look elsewhere for your schadenfreude fix.

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Comment by Blue Skye

2017-08-11 16:41:29

You call a gambler smart when he wins, or when he makes the same bet as you. Folks who play a bubble are delusional, not smart, but they still might get lucky. Good luck to him if he can avoid being crushed.

Comment by Mafia Blocks

2017-08-11 16:53:18

DebtDonkeys

Comment by GuillotineRenovator

2017-08-11 22:54:12

It wasn’t smart, it was dumb luck. Nobody could have known the Fed’s moves beforehand and the associated re-bubbling of house prices.

Tragic? Depressing? They invested in a vehicle and it didn’t work out. I invest in a stock, it went down, I sold and lost - that’s part of the investment! Why does everyone feel they are always entitled to a gain when they purchase real estate?

What will prick the housing bubble is the widespread realization that houses - primary residences at least - are an expense, not an income producing asset. Not money printing presses as so many seem to believe.

It was a simple phone call between two real estate billionaires that led to the formation of a behemoth in the house-rental industry.

“The easy money has been made,” said Carl Bell, an early investor in the single-family rental industry and co-head of investments at Washington-based Invictus Capital Partners. “From here it’s about operational and financing efficiency to help drive returns. Scale is key.”

“The only way the single-family home business works long term is if operators have massive efficiencies of scale,” said Jonathan Shechtman, managing principal at Axonic. “Otherwise the costs of things like repairs and maintenance on houses, which each have a different floor plan, may have higher expenses when compared to apartments.”

I’ve had UHS tell me the HUD changes were a bigger boost, which also started: just at the end of 2014! Long time readers will remember the market was rolling over that fall. In January/February 2015 IIRC, I posted a Mercury News report with a flipper saying he had overpaid. By May 2015 it was multiple bid/ over asking stories again in the same paper. But “the trend” hasn’t stopped since, and notice it isn’t about “helping buyers”, but the bottom line.

Well the timing was interesting. House prices had run up for years, started to wobble right before the election cycle, and boom! Mel was all over it with easier and easier money, as was HUD. And this was after years of ZIRP and 8 trillion$ in runway foam. So much for an organically determined market.

They don’t care about that. Stay in power, use the next crisis to advance the globalist agenda. Think about how screwed up this all is: practically all shack loans now are zero/low-down subprime and almost all backed by the government. And we are back to the race to the bottom of lending because “we’re losing business!”

Comment by 2banana

2017-08-11 10:21:53

Under Hillary, there would have been another TRILLION dollar bailout for Fannie and Freddie.

The circle of life for democrats. Buying votes doesn’t come cheap.

Under Trump, those bailouts are not coming.

Why do you think Chicago is NOW panicking?

Why do you think public union pensioners are NOW panicking?

There has been a great disturbance in the progressive force. It is almost like millions of FSA moochers cried out in pain….

Comment by scdave

2017-08-11 12:29:42

There has been a great disturbance in the progressive force ??

Yeah well there is a great disturbance in the Conservative force also…We are just a inadverdant error from declaring the experiment on November 8 was a terrible mistake…The only question is, if it happens, how bad will it be…

Comment by 2banana

2017-08-11 13:15:14

It is real amusing listening to special progressive snowflakes talk about a civil war or a coup.

They really have no idea what they are wishing for.

How bad it can be….

++++++

We are just a inadverdant error from declaring the experiment on November 8 was a terrible mistake…The only question is, if it happens, how bad will it be…

West Virginia Governor Jim Justice said Donald Trump is “really interested” in his plan to prop up Appalachian mining by giving federal money to power plants that burn the region’s coal.

Justice, a coal and real estate mogul elected governor last year as a Democrat, announced at a West Virginia rally alongside President Trump last week that he’s becoming a Republican. Justice has recently spent a “goodly amount of time” meeting one-on-one with Trump and has liked the feedback to his pro-coal proposal. The plan calls for the Department of Homeland Security to send $15 to eastern U.S. utilities for every ton of Appalachia coal they burn.

“He’s really interested. He likes the idea,” Justice said in a phone interview on Wednesday when asked about Trump’s reaction. “Naturally, he’s trying to vet the whole process. It’s a complicated idea.”

In Justice’s eyes, the coal payments will be necessary because Trump’s moves to roll back regulations on the Appalachian coal industry won’t be enough to preserve it. The Appalachian coal sector has been shrinking for years as companies are forced to spend more money to access harder-to-reach seams of the fossil fuel. Meanwhile, competitors in regions including the Illinois Basin and Powder River Basin of Wyoming and Montana have much thicker coal seams that are cheaper to get to.

Who said anything about that ?? Hell, he may not last the Manafort revelations if Manafort decides to sing.

Comment by Lurker

2017-08-11 14:48:13

“we are back to the race to the bottom of lending because “we’re losing business!”’

Interesting how they’re losing business even with reckless, stupidly loose policies. It seems they’ve run out of people to take out loans at any standard. The only thing that would solve this kind of over-saturation is negative interest rates, and our economic elites stopped talking about that rather suddenly, around November 2016.

Comment by Professor 🐻

2017-08-12 06:01:35

“The trend started in late 2014 when Fannie Mae and Freddie Mac announced new programs that allowed loans with as little as 3 percent down. But many large banks still reeling from the housing bust that cost them billions were skeptical. Bank of America Chief Executive Brian Moynihan said his company was unlikely to participate. But less than two years later, the bank started offering 3 percent down loans through a partnership with Freddie Mac. Wells Fargo, the nation’s largest mortgage lender, also jumped in last year, partnering with Fannie Mae. JPMorgan Chase now offers 3 percent down loans as well.”

While I realize the collective amnesia about the consequences of ever-loosening lending standards is par for the course, it is still shocking to realize that nothing was learned in the last crisis, aside from the knowledge that reckless gambling is rewarded with bailouts.

What I don’t get is that there supposedly is a shortage of listing many places so why would you lower the bar. you should be raising it.
I also wonder why non-profits are lending/giving money to people to buy homes in tight markets. There is already a shortage don’t drive up prices more.
Now if there is a 10 month suppy or so then yes let the non-profits assist but not in Seattle or Portland. Makes NO sense.

Not just lower it, do that repeatedly for years. At higher prices there’s more risk, again suggesting tighter lending. But we’re trying to be logical here in the reality based community. Taking things at supposed face value. In fact the GSE’s are all about unaffordable housing. Driving prices up, milking the population and sending the money to DC. The economic boost props up politicians and government spending. Sure we have less to spend on everything else, but that keeps us dependent.

I can’t say these are conscious activities at every level, but at some level it has to be. Why didn’t the central bank spend $8 trillions building houses instead of foaming the runway for banks? Why hasn’t the government done something about the GSE status and re-privatized shack lending? If you had said we’d still be in the exact same position 10 years or more since they were placed in conservator-ship, no one would have believed it.

The short answer is what they say above: they are out of buyers, just like 2003 when prime lending plummeted and subprime exploded.

“end of 2014! Long time readers will remember the market was rolling over that fall.”

Sigh… I remember it well. There were some dramatic price cuts in a short amount of time, even at the low end. Then the “push button, get mortgage” billboards appeared and it was back to bidding wars and skyrocketing prices overnight.

So they managed to extend it another 2+ years, in the process roping in a whole bunch of new and poorer victims who would have been spared had the implosion been allowed to continue organically. To say nothing of the years and money lost by the victims no one ever talks about - the people on the sidelines who were priced out of entire cities and the impact that had on their careers, family sizes, financial security, etc. No matter how low prices eventually drop, nothing will make up for that time.

“Pilot programs with Guild Mortgage of San Diego and United Wholesale Mortgage of Michigan require the borrower to put down 1 percent of their own money. A pilot through Movement Mortgage allows a borrower to put down nothing. David Battany, Guild’s executive vice president of capital markets, said it launched its 1 percent down program to ‘address the down payment challenge, especially in California,’ where real estate prices are particularly high. It was also struggling to compete with lenders that had previously launched very low down payment options. ‘We were losing business,’ Battany said.”

With the return of zero percent downpayment mortgages to California, the next crash cannot be far off.

Wow. Its like America’s collective memory gets shorter and shorter. We literally JUST had this issue a few years ago…3% down (or 0% down) loans, whats the difference really, speculation, mortgage brokers pushing their wares.
And we’re right back to it…

This is related to why I think it’s the same bubble. When a mania is truly crushed, no one thinks of repeating the mistakes for years. After Texas crashed, “speculative building” were dirty words for two decades. Look at how even posters here rushed in to gamble borrowed money on houses.

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Comment by Professor 🐻

2017-08-12 06:47:26

Same bubble, resurrected, reflated, and reignited by the Fed’s protracted period of extraordinary accommodation targeted squarely on housing…

Comment by Professor 🐻

2017-08-12 09:35:01

It’s well worth reflected on historically significant manias, such as Holland’s Tulipmania or England’s South Sea Bubble. One sign that such an episode has finally ended is when historians weigh in with amazement over the mass delusion that drove the manic behavior.

We aren’t even close at this point. In fact, the current delusional thinking is that the mania is over and the present situation of an unaffordable market, dominated by government loans and investors, is normal.

What happens to home prices during the current housing boom and the next housing bust depends to some degree on whether the home is relatively “affordable” — whatever that means at today’s prices — or more expensive.

Prices in the low tier rose 10.8% year-over-year, according to the TPI, published in August. For mid-tier homes, the index rose 7.5%. And for expensive homes prices rose 4.8%.

That principle has been true for the past 17 years of the index, covering two housing booms and one housing bust so far. The chart below shows how prices of homes in the low tier (yellow line) rise much faster than higher priced homes, but during the bust, they also plunge much faster and bottom out a lot lower (chart via John Burns Real Estate Consulting):

From 2000 through the peak of the prior bubble in 2006, prices for low-tier homes soared 131%. For mid-tier homes, prices soared 108%. And for high-end homes, the prices rose only 90%.

But during the housing bust, the low-tier plunged about 50%. By early 2012, they were only 18% above the level of 2000. The mid-tier index dropped 39% from peak to trough. But the high tier dropped only 30% and remained 34% above the 2000 level.

So what does this mean? If you focus on lower-priced homes, beware that you are investing in a more volatile section of the market from a pricing perspective and beware that lower-priced homes have appreciated the most. Remember that relatively high home prices can last for years (as they did from 2003–2007), so don’t panic.

A subprime mortgage is a type of mortgage that is normally issued by a lending institution to borrowers with low credit ratings. As a result of the borrower’s lower credit rating, a conventional mortgage is not offered because the lender views the borrower as having a larger-than-average risk of defaulting on the loan. Lending institutions often charge interest on subprime mortgages at a rate that is higher than a conventional mortgage in order to compensate themselves for carrying more risk.

A weekend topic starting with Mortgage News Daily. “Federal Housing Finance Agency Director Melvin L. Watt focused much of his speech to the National Association of Real Estate Brokers on its five-year goal of creating two million new Black homeowners. There were ‘The unsavory practices that set the stage for our homeownership rates to get worse, especially subprime and predatory lending that disproportionately targeted minorities with mortgages that were designed to fail,’ and the generally irresponsible practices in the real estate and mortgage finance sector that ultimately led to the meltdown.”

“Efforts to increase credit access are underway and some have borne fruit. Fannie Mae has made several changes to calculating student loan debt in DTI ratios and both GSEs are considering how to better verify income for self-employed applicants and people who take part in the so-called gig economy.”

“Watt said FHFA and the GSEs have also worked to assess the role of debt-to-income (DTI) ratios and creditworthiness. The Dodd-Frank Act ‘ability to repay’ rule which gave rise to the qualified mortgage or QM standards established a regulation which lenders can meet in part with loans that have DTIs that do not exceed 43 percent. However, the GSEs, while they remain in conservatorship, can purchase loans with higher DTIs and do so for otherwise creditworthy borrowers with DTI rations up to 50 percent.”

From Fox 10 Phoenix in Arizona. “Getting a mortgage loan isn’t the easiest thing, especially for those student loan debt. Changes coming to mortgage loans, however, may make the process easier. For many millennials like Tyler McKirgan, home ownership is that American dream they just can’t reach just yet. The culprit? Student loans. ‘It definitely is a big burden, because millennial wages are low, and student loans are high,’ said McKirgan.”

“Mortgage lender company Fannie Mae, however, is revising their loan requirements, which could ease the burden of debt. As of now, the threshold for debt-to-income ratio is 45%, and if an applicant is over that threshold, they’re not likely to qualify for a conventional loan. For McKirgan, who is a recent grad school graduate, he knows that feeling of potential rejection all too well.”

“‘I’m at 46% right now, so on Saturday, I’m gonna be jumping for joy,’ said McKirgan. Saturday is the day when that threshold will be raised to 50%. ‘I think its great opportunity for someone who felt like they can’t buy a home, because they’re so burdened with debt, especially student loan debt.’”

From KPBS in California. “If you applied for a mortgage last month and didn’t quite qualify, you might want to try again this month. Some lending standards have been eased to allow more people to get into the market. Government controlled mortgage giant Fannie Mae is allowing borrowers to have higher levels of debt and still qualify for a home loan. Previously, the debt-to-income ratio was capped at 45 percent. Now it’s at 50 percent, making room for a larger house payment.”

“For example, for a household making approximately $7,000 in gross income a month, with a few hundred dollars in debt payments, it could mean a significant loan increase, said Mark Goldman, senior loan officer with C2 Financial Corporation and real estate instructor at San Diego State University.”

“‘Their ability to afford a home with 10 percent down went from about $455,000 up to about $540,000,’ Goldman said.”

sure, george bailey loaned on character but as I recall his family run savings & loan built the houses, so they also had collateral.

remember potter’s accountant raving about them?

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Comment by tj

2017-08-11 14:42:23

but prime lenders never want to rely on collateral. that’s just a backstop. they want borrowers to prove they can repay the loan. income. subprime is the road to ruin and that’s what bailey was fomenting.

in the movie, bailey was the hero. in reality, bailey is the bad guy.

Comment by MightyMike

2017-08-11 15:34:57

his family run savings & loan built the houses

Yeah, there were a few lines of dialog about how George and his father made great efforts to save money on materials and get the houses built cheaply without sacrificing quality.

Comment by Blue Skye

2017-08-11 15:55:04

I spent a peaceful evening tied up under Bailey Bridge just two nights ago.

WASHINGTON, D.C. – Ginnie Mae today announced that issuance of its mortgage back securities (MBS) totaled $41.95 billion in July, an increase from June’s issuance of $41.53 billion.

A breakdown of July’s issuance includes $40.05 billion of Ginnie Mae II MBS and $1.9 billion of Ginnie Mae I MBS, which provided access to $40.51 billion in capital for single family home loans and $1.44 billion for multifamily home loans.

Issuance in Fiscal Year 2017 to date is $340.78 billion, which maintains pace for Ginnie Mae to surpass its MBS issuance totals for FY16. Ginnie Mae total outstanding unpaid principle balance increased to $1.856 trillion, which is up from $1.705 trillion in July 2016.

About Ginnie Mae
Ginnie Mae is a wholly-owned government corporation that attracts global capital into the housing finance system to support homeownership for veterans and millions of homeowners throughout the country. Ginnie Mae mortgage backed securities MBS programs directly support housing finance programs administered by the Federal Housing Administration, the Department of Veterans Affairs, the HUD Office of Public and Indian Housing, and the Department of Agriculture Rural Housing Service. Ginnie Mae is the only MBS to carry the explicit full faith and credit of the United States Government.

Ginnie Mae I MBS are modified pass-through mortgage-backed securities on which registered holders receive separate principal and interest payments on each of their certificates. Ginnie Mae I securities can include single family, multifamily, manufactured home, and project construction loans.

Ginnie Mae II MBS are modified pass-through mortgage-backed securities for which registered holders receive an aggregate principal and interest payment from a central paying agent. An issuer may participate in the Ginnie Mae II MBS either by issuing custom, single-issuer pools or through participation in the issuance of multiple-issuer pools, which combine loans with similar characteristics.

Correct me if I’m wrong, but doesn’t the Fed snap up this agency debt by the megabillions?

Who gets harmed if the Fed doesn’t get paid back? Some 🏦s get to collect and resell houses with defaulted mortgages and get made whole on loan principle through federal guarantees, and no individual is harmed if the Fed buries the toxic MBS on its balance sheet. Everyone that matters wins.

Seller Rudy Ionides was busy packing boxes for his move this weekend when he received a letter from a lawyer saying the buyers of his home want to adjust their offer. They want to reduce the sale price by $50,000, extend the closing date to Sept. 7 and have Ionides loan them $500,000 in a vendor takeback mortgage.

The buyer is telling the family that they need more time and a loan because the buyer of their home is demanding similar terms.
“He’s asking me to enter into a contract with him that he will return this money, but he’s breaching his contract once already,” Ionides told CTV Toronto. “What trust do I have he’s not going to breach it a second time?”

Most financial advisors don’t consider downturns. That’s the problem with markets in general everybody tells you to buy and rarely tell you to sell.

Anyway, the advisor will want to know your current income/ spending / assets/ future obligations and tolerance for risk.

Based on your age, dependents, plans for the future and risk tolerance they’ll devise an investment plan for you.

Typically, they’ll push for mix of mutual funds and bond funds. Some will steer you to funds that the advisor gets a commission.

If you tell the advisor you are concerned about a downturn they will adjust your investments towards a bond fund and discuss the merits of owning government bonds. They don’t typically favor precious metals.

You can find most of this information on the internet and save yourself some money. Vanguard is a good place to start and they won’t kill you on fees.

Keep in mind that advisors don’t recommended keeping a lot of cash on hand unless it’s for a rainy day fund. They like you to be fully invested which can be a problem if markets correct and you don’t have any money for good deals.

JQ
Thanks for the insight. Very helpful. We have Vanguard and high yield savings with Barclays. Trying to decide if we should sit out of the market for a couple of years to protect assets in case shtf. I realize it’s not recommended by many to stay liquid but all markets are a bit scary right now. Thanks again.

If the price you pay for an investment determines your rate of return from that investment and this investment is widely perceived to be vastly profitable then the price of the investment will reflect this, and since the price reflects this perception the price will be high and thus the rate of return will be low.

When these perceptions of the investment shift from being vastly profitable to dismal then the prices will reflect this shift and, assuming the underlying fundamentals of the investment remain sound, the price of the investment will then become but a fraction of the previous price and the rate of return will reflect this new lower price.